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Three Overlooked High Yield ETFs - Investment Ideas

With Treasury yields seemingly hitting new lows on a weekly
basis, many investors have become desperate for higher levels of
current income. This has pushed many into ETFs that have a focus on
yield, such as junk bond funds, MLP products, and more
'traditional' equity exchange-traded securities. These include
funds that zero-in on mainstays of the dividend world like
utilities or firms that have a long history of raising their
payouts over time.

Unfortunately, many of these products have become ultra-popular
and thus crowded trades. In fact, from a year-to-date look, ETFs
that promise high yields have dominated the fund flows reports,
with products targeting bonds--
LQD
,
JNK
, and
HYG
-preferred stock-
PFF
-Mortgage-backed securities-
MBB
-and MLPs-
AMJ
-all adding more than $1 billion dollars in assets since the start
of 2012.

However, not all dividend-focused products have been created
equal nor have they received the same amount of buzz. Instead, a
number of products targeting high yield securities are still
overlooked despite offering up sizable yields (read
11 Great Dividend ETFs
).

Furthermore, many of the overlooked funds are in sectors which
have modest correlation levels to the aforementioned segments,
suggesting that these glossed-over products could also help from a
diversification perspective as well.

With this backdrop and an increased focus on yield by many
investors, we have highlighted three funds below which payout at
least twice as much as the S&P 500, but have not received
anywhere near the attention that many of their high yielding
counterparts have. In fact, all three have less than $250 million
in AUM, a paltry figure compared to what many of the aforementioned
funds have pulled in just this year (see more in the
Zacks
ETF Center
).

Hopefully this short list can give investors new ideas for ways
to achieve higher levels of current income without too much of a
focus on the recently popular segments, allowing for a more
balanced portfolio overall. It could also demonstrate that
there are more ways to achieve high payout levels than you might
think, and that looking beyond the usual suspects can 'yield' a
more well rounded approach to investing.

For a global look at high dividend yielding securities,
investors can certainly look to FGD for overlooked exposure. The
product tracks the Dow Jones Global Select Dividend Index which
looks to give exposure to about 100 stocks across a variety of
markets around the globe.

However, the fund doesn't just invest in 100 of the highest
yielders, instead it looks to focus on companies that have a
current year dividend-per-share greater than the trailing five year
annual average while payout ratios must be less than 60% for
American and European securities. By doing this, investors could
gain exposure to a group of companies that are increasing their
payouts but still have a nice buffer of safety (also read
Can You Beat These High Dividend ETFs?
).

With this focus, the fund has a tilt towards large cap and value
securities from around the world. Sectors favor the usual suspects,
with telecoms, utilities, and financials taking up the top three
spots. In terms of countries, Australia, the U.S., and the UK take
the top three and account for nearly 45% of the portfolio.

As of right now, the product pays out a very solid 5.8% to
investors in 30 Day SEC yield terms. Still, the fund has under $185
million in AUM, suggesting that the fund isn't the most popular
although it does have reasonable volume but somewhat high expenses
at 60 basis points a year.

For another global fund with a high yield, investors also have
Guggenheim's LVL to consider. The product tracks the S&P Global
Dividend Opportunities NR Index, a benchmark that consists of 100
stocks and ADRs that have at least $1 billion in market cap and are
also high yielders.

Thanks to this and the product's focus on dividend yield
weighting, assets are pretty well spread out while mid and small
caps make up a good chunk of assets as well. In fact, large caps
account for just 37% of the portfolio, although it should be noted
that more than half of the fund is in value stocks (also see
Three Excellent Dividend ETFs for Safety and
Income
).

For sectors, telecom accounts for nearly one-fourth of the
total, while energy and consumer cyclical stocks round out the top
three, just beating out financials and real estate. Country
exposure is tilted towards the U.S. in the top spot, although the
UK and Australia again round out the top three followed by French
and German securities to finish off the top five.

This product also charges 60 basis points a year in fees, but
has slightly lower volume of about 30,000 shares a day. However,
the yield on this product comes in at 8.8% in 30 Day SEC terms,
crushing many other products in the space even though the total AUM
is still stuck below $50 million.

If investors want a more concentrated play on a particular high
yielding sector, KBWD could be the way to go in the financial
space. The product uses a dividend yield weighting methodology and
holds roughly 36 securities in its basket, focusing in on financial
service companies including BDCs, REITs, insurance, and banking
firms.

The product also potentially provides a different market cap
level of exposure as large caps account for just 10% of the total
assets. Instead, micro caps make up roughly 29% while small caps
make up nearly half of the total portfolio (see
Three Impressive Small Cap Dividend ETFs
).

Investors should also note that the product is entirely focused
on American securities, while growth stocks only make up 9% of the
assets. This means that strong returns may be hard to come by and
that the yield will have to be the focus for those seeking to bet
on this fund.

Once again, this fund isn't exactly popular with investors
either as the AUM for the fund is just $115 million. However, the
product does charge a rather high 1.32% a year, a level that may be
prohibiting some from taking a closer look at the fund. Still, the
30 Day SEC yield comes in at nearly 9%, while the trailing 12 month
payout tops 10%, implying that it could truly be a great
destination for investors searching for an overlooked high
yielder.

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